Front Row Motorsports, Inc. v. Diseveria

ADDITIONAL FINDINGS OF FACT AND CONCLUSIONS OF LAW

Susan C. Rodriguez A United States Magistrate Judge

THIS MATTER is before the Court following a bench trial and the issuance of its Findings of Fact and Conclusions of Law wherein the Court requested additional briefing on ancillary attorneys' fees before rendering a decision on that issue. (Doc. No. 83). Having received that briefing and supporting sworn affidavits, the Court makes Additional Findings of Fact and Conclusions of Law, and amends the judgment.^[1] The Additional Findings of Fact and Conclusions of Law made herein supplement, and do not supplant, the Court's initial Findings of Fact and Conclusions of Law (Doc. No. 83).

I. ADDITIONAL FINDINGS OF FACT

The Court makes the following additional findings of fact:

1. As explained in the Court's initial Findings of Facts and Conclusions of Law (Doc.

No. 83), both Devine and DiSeveria signed an Indemnity Agreement. The Indemnity Agreement stated in relevant part that Devine and DiSeveria:

hereby fully indemnify and agree, each in his individual capacity, to jointly and severally defend and hold harmless Robert A. Jenkins and Front Row Motorsports, Inc., its officers, directors, partners, agents and employees from and against any claims, liabilities, suits, proceedings, causes of action, or damages of any kind, whether in contract, tort or otherwise, that arise from or relate to claims by any and all third parties against one or both Indemnitees arising from or related to (a) the December 06, 2016 sale and transfer by BK Racing, LLC to Front Row Motorsports, Inc. of a NASCAR Cup Series Charter (number 33) Member Agreement; (b) any security agreements or financing statements seeking to be enforce [sic] against the Charter by any person or entity; (c) any person or entity claiming any interest whether perfected or not, in the Charter; and (d) any judgment awards being levied against the Charter by any person or entity. The Indemnitors shall pay claims and losses in connection with the [sic] all of the foregoing and shall investigate and defend all claims, suits, or actions of any kind or nature, including appellate proceedings in the name of the applicable indemnified party and shall pay all costs and judgments and attorney's fees which may issue thereon

(Pl.'s Ex. 8) (emphasis added).

2. By signing the Indemnity Agreement, Devine and DiSeveria agreed to defend and indemnify Plaintiffs and specifically to pay attorneys' fees and costs arising from claims by third parties arising from and related to: “(a) the December 06, 2016 sale and transfer by BK Racing, LLC to Front Row Motorsports, Inc. of a NASCAR Cup Series Charter (number 33) Member Agreement; (b) any security agreements or financing statements seeking to be enforce[d] against the Charter by any person or entity; (c) any person or entity claiming any interest, whether perfected or not, in the Charter; and (d) any judgment awards being levied against the Charter by any person or entity.” (Pl. Ex. 8; Doc. No. 83 ¶¶ 17-19, 96).

3. Despite repeated requests and notice from Plaintiffs, Defendants refused to defend or indemnify Plaintiffs, including paying attorneys' fees and costs, in connection with the Disposition Notice, North Carolina Lawsuit, and Virginia Lawsuit, all of which fell under the scope of the Indemnity Agreement because they were claims by the third party Bank related to the

CMA 33 sale in December 2016, and the Bank's enforcement of its UCC-1 Financing Statement, whether perfected or not. (Pl. Ex. 2, 8, 11, 12, 14, 77; Stip. 28; Tr. 56:10-58:19; Tr. 200:3-6; Tr. 201:12-15; Tr. 202:22-203:1).

4. Defendants' breach of the Indemnity Agreement caused Plaintiffs to incur attorneys' fees and costs. (Tr. 132:12-136:8; 204:4-10; Pl. Ex. 23; Doc. No. 105).

5. Jenkins of Front Row had experience with hiring attorneys related to his other businesses for a variety of legal matters, and helped to select Skufca Law, PLLC, formerly Moretz & Skufca. (Tr. 134:17-135:14-20).

6. Based on other business experiences, Jenkins believed the rates and fees charged by Skufca Law, PLLC were reasonable for the work that was performed from October 2017 through the conclusion of the Virginia Lawsuit. (Tr. 132:16-136:1).

7. Also, as further detailed in the Court's initial Findings of Facts and Conclusions of Law (Doc. No. 83), Plaintiffs were billed legal fees and costs arising out of and in connection with the Disposition Notice, North Carolina Lawsuit, and Virginia Lawsuit. (Stip. 37; Tr. 204:4-10).

8. Defendants' actions and inactions with respect to the Virginia Litigation caused Plaintiffs to incur more attorneys' fees and costs in the Virginia Litigation. The issues became more complicated and time intensive due to the fact that the lien claimed on CMA 33 arose from Defendants' loan obligations rather than Plaintiffs' obligations. Defendants, at least initially, refused to provide facts and defenses known to them to aid in the Virginia Litigation despite repeated requests. Defendants also failed to accept service of certain documents. (Doc. No. 90-3 ¶ 15; Doc. No. 83 ¶¶ 46-61).

9. Plaintiffs' Complaint requests attorneys' fees for defending the Disposition Notice, North Carolina Litigation, and Virginia Litigation, but does not mention BK Racing's bankruptcy

case or fees incurred in BK Racing's bankruptcy case. (Doc. No. 1 ¶¶ 70, 80, 83, 93, 102).

10. At trial and in post-trial briefing, including, sworn affidavits, Plaintiffs claim $412,397.48 in attorneys' fees and costs (referred to herein as the “Ancillary Fees”). This total consists of $374,778.70 in attorneys' fees for 1,363.80 hours of work at rates ranging from $75 to $350. (Doc. No. 105). Of the amount requested, Plaintiffs acknowledge that $12,500.50 was incurred in BK Racing's bankruptcy case, consisting of 46.3 hours. Id. Expenses and costs included $37,618.78, which based on the Court's review of the legal invoices included typical litigation-related expenses and costs including, but not limited to, legal research, filing fees, courtreporting related fees, and travel and transportation for case-related matters.

11. On February 15, 2018, BK Racing filed a bankruptcy petition in the United States Bankruptcy Court for the Western District of North Carolina. In re BK Racing, LLC, No. 1830241 (Bankr. W.D. N.C. ). Front Row purchased a separate charter, CMA 32 (separate from CMA 33 at issue in this case), from BK Racing in BK Racing's bankruptcy proceedings. (Tr. 50:1851:9).

12. During BK Racing's bankruptcy case, Plaintiffs' counsel incurred attorneys' fees for attending hearings, reviewing pleadings/filings, and discussing the bankruptcy with other involved counsel to assist in defending Plaintiffs in connection with the Bank's claims. (Doc. No. 90-3 ¶ 14).

II. ADDITIONAL CONCLUSIONS OF LAW

The Court makes the following additional conclusions of law:

A. Under North Carolina law, a party can recover direct attorneys' fees if such recovery is authorized by statute. Stillwell Enters., Inc. v. Interstate Equip. Co., 266 S.E.2d 812, 814-15 (N.C. 1980). North Carolina law is less clear on whether a party may recover ancillary attorneys' fees without statutory authority, particularly where the parties contracted for and an

indemnity agreement between the parties explicitly provides for recovery of ancillary attorneys' fees.^[2] Queen City Coach Co. v. Lumberton Coach Co., 50 S.E.2d 288, 535-36 (N.C. 1948) (concluding indemnity agreement providing for any and all damages or loss did not cover attorneys' fees “[i]n absence of an express agreement” and “considering the language of the contract of indemnity in the case”); GR & S Atl. Beach, LLC v. Hull, No. 11 CVS 5883, 2011 WL 4501912, at *6 (N.C. Super. Ct. Sept. 29, 2011) (“The Court is not aware of any opinion from the North Carolina Supreme Court that directly compares the rules in Stillwell and Queen City Coach and squarely addresses whether the North Carolina general rule prohibiting the recovery of Direct Fees absent statutory authority extends to the recovery of Ancillary Fees when the agreement between the parties clearly provides for such recovery.”); US Foods, Inc. v. White Oak Manor -Charlotte, Inc., No. 3:19-cv-00227-RJC-DCK, 2021 WL 2815805, at *5 (W.D. N.C. July 6, 2021) (“North Carolina courts have not clearly determined whether ancillary attorneys' fees must be expressly authorized by statute.”); Crescent Univ. City Venture, LLC v. AP Atl., Inc., No. 15 CVS 14745, 2019 WL 3765313, at *35-39 (N.C. Super. Ct. Aug. 8, 2019) (noting the state of the law on recovery of ancillary fees is “less than clear” and “remains uncertain”); Sara Lee Corp. v. Quality Mfg., 201 F.Supp.2d 608, 614 (M.D. N.C. 2002), aff'd, 61 Fed.Appx. 836 (4th Cir. 2003) (concluding statutory authority is required to recover ancillary attorneys' fees where an indemnification agreement provides for ancillary attorneys' fees); Norfolk S. Ry. Co. v. TIMEC Co., Inc., No. 1:08CV99, 2009 WL 3787621, at *5 (M.D. N.C. Nov. 9, 2009) (rejecting argument that statutory authorization is required for attorneys' fees when contracted to as part of indemnification agreement, but then finding indemnification at issue did not include attorneys' fees); Stephenson v. Caterpillar Inc., No. 2:16-CV-00071-JRG-RSP, 2019 WL 4741735, at *8-9

(E.D. Tex. Sept. 11, 2019) (applying North Carolina law, recognizing the uncertain state of the law on this issue in North Carolina, and awarding ancillary fees covered for in an indemnification clause), R. & R. adopted, 2019 WL 4737071 (Sept. 27, 2019).

B. At least one court in this District has...